Friday, February 18, 2011

During the boom years in new home construction, by far the largest challenge to builders was maintaining build quality and customer service to a dramatically larger customer base – an issue which continues to hit the bottom line of some the country’s larger builders with increased costs to address warranty issues and defects.But as boom turned to bust and new home starts plummeted, builders refocused on improving their entire production chain to great effect.

According to the most recent J.D. Powers & Associates survey in 2010, customer satisfaction with home builders has risen for the third year in a row to 826 on a 1,000-point scale – the highest level since the study was started in 1997.The 2010 survey was based on responses from over 16,400 buyers of newly built, single-family homes in 17 different markets.Most buyers had lived in their homes for four to 18 eighteen months.

Not surprisingly, the most important takeaway from the survey was that those builders who actively listened to what customers wanted and were sincere about building ongoing relationships have endured the best. Alternatively, those companies which lost this consistent focus either had to scale back operations or leave the marketplace entirely.

Between 2009 and 2010, customer satisfaction improved in eight of nine categories with the largest jumps in workmanship & materials, home readiness and the builder’s design center; the only factor not seeing an improvement from 2009 were the recreational facilities provided by the builder.

But what was most interesting to me was that the importance of factors driving that overall satisfaction has shifted from 2009:whereas the ranking of price/value and warranty/customer service fell, it rose for the builder’s sales staff as well as the construction manager.This rise seems to have matched up directly with the renewed focus on retraining sales managers as well as hiring or retaining the most professional construction experts in the business in order to shepherd skittish buyers from contract through closing.

Another big trend showing up in the survey results was the awareness of ‘green’ features in their homes; whereas just 31 percent of new-home owners perceived their homes as environmentally friendly in 2009, a year later that rate had nearly doubled to 61 percent.In some markets, builders such as KBHome are even marketing annual energy savings as a means to separate their new designs from the competition.

J.D. Powers also surveys buyers on new-home quality alone, and that also reached a record high of 844 in 2010 after improving in 15 of 17 markets.The biggest remaining quality issues?Landscaping, kitchen cabinets and HVAC systems.

In terms of the highest-performing markets in 2010, those included Phoenix, Las Vegas, Southern California, Orlando and Sacramento – all challenging markets in which builders are competing with a high level of discounted foreclosures.Since builders tend to be strong in specific markets, it’s difficult to hand one builder a national #1 ranking, but Shea Homes and Standard Pacific Homes both ranked highest in three separate markets, while KBHome ranked highest in two markets.Other builders which are well-known regionally also led the survey in their respective home markets.

Finally, J.D. Power also ranks home appliances, and the winners for 2010 were the following: Samsung (refrigerators), Wolf (range/cooktop/oven), Miele (dishwasher) and Samsung (clothes washer and dryer). While the traditional brands seen most often in new homes such as GE, Whirlpool or KitchenAid certainly performed well in the surveys, it’s clear that Samsung’s renewed focus on improving its own quality has also paid off well for the company – and something smart builders could leverage to boost their own rankings.